Question

Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 31,000 shares authorized, 15,600 shares issued, and 12,400 shares of common stock outstanding. The journal entry to record the dividend declaration is:

Answer 1

Answer:

Dr Retained earnings  $6,200

Cr Dividends payable               $6,200

Explanation:

The shares entitled to dividends payment are those outstanding as at when dividends were declared,that is those shares in issue as at the date of dividend declaration,in essence only the outstanding shares of  12,400 are entitled to dividend payment of $0.50 per share.

The amount of dividend payment=$0.50*12,400=$6,200

The total dividends declared of $6,200 would be debited to retained earnings and credited to dividends payable until the payment date when the cash would be settled.